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Tips & Guides — 04 Jul 2022
How to save money with SaaS
Affiliate management software should fit a business like a glove. That’s why affiliate networks and agencies, as well as major eCommerce brands with partner programs, often think of building in-house solutions.
This approach potentially allows companies to consider all business needs and tweak the software to their workflows. It’s a rocky road though that requires vast investments both of time and money.
Businesses that can’t afford to splurge on developing a new technology may rely on cloud platforms. This article will examine the typical expenses of building an on-premise affiliate management software and compare them with budgets allocated for SaaS applications. Read on to learn the following:
IT spendings may vary tremendously depending on your approach to building software, needed functionality, workloads, and other variables. The precise economies of each project may be calculated individually, and even it can’t exclude the unplanned expenses and other surprises.
Several years ago, the NetSuite ERP reached out to the Hurwitz & Associates firm to calculate the sum SMB and mid-market enterprises save when relying on SaaS apps. In the white paper, Hurwitz & Associates worked out a four-year total cost of ownership of on-premise and cloud services and discovered the following:
SaaS is more than 2X cheaper for small businesses.
The total cost savings fluctuate depending on the number of users. Companies with 200+ users saved 35% of total spending relying on cloud providers, while companies with 50 users saved 55% of IT spending!
The in-house software developers spend a massive part of their budget on the initial IT infrastructure, including hardware and software. On-premise solutions also require more personnel for launch. However, the biggest chunk of expenses refers to system maintenance and ongoing personnel – monitoring, troubleshooting, service and support, training, and other processes an IT department is involved in.
Meanwhile, cloud computing requires much fewer investments into the initial infrastructure and personnel, as well as ongoing maintenance. Generally, up to 90% of expenses reliant on cloud solutions are regular SaaS subscription fees.
Full-cycle in-house affiliate marketing software solution requires solid investments into IT infrastructure. If you choose to stick to building your own data centers, you’ll need servers, network infrastructure, a backup system, and workstations for your team.
A decent server may cost you anywhere from $3,500 to $10,000, and the best practices recommend having three of them. Next, you’ll need a backup system to protect your software from data loss. Consider spending $2,000 or more on this item as well.
Apart from it, prepare a budget for a network infrastructure hardware – switches, controllers, routers, cables, etc. Too many factors at play, such as sticking to wired or wireless solutions, amount, or class of network infrastructure, makes it too difficult to tote up the expenses on this line.
An option to cut costs on the initial hardware is renting servers; the price ranges from $480 to $3540 annually. This approach may help you avoid vast initial spending and provide better scalability, as you may just rent the more powerful server instead of rebuilding the whole data center. However, this solution implies certain risks, such as limited ownership and reliability of your on-premise software.
SaaS applications allow you to avoid spending on hardware at all.
At least, if we’re talking about the IT infrastructure for data centers, as you still need to buy workstations for your affiliate network or program managers. Cost savings on this budget line are around 4%. On-premise operators spend 11.7% of their budget on data centers against the 7% that cloud users allocate.
Affiliate management SaaS providers, on average, have their own servers or rent robust and powerful servers from Amazon or others. It helps split the costs of running data centers between thousands of clients, making a total sum not so painful for each. For you, these expenses will be included in a SaaS subscription or platform fee. In Affise, the platform fee starts at only $500 monthly.
Investments in data centers don’t boil down to hardware IT infrastructure. Apart from it, affiliate agencies and networks need software solutions. One of the most significant expenses is licenses for servers and users. The sum spent on them may vary depending on the number of servers, amount of CPU in each of them, and other configuration details.
The next license every business needs is the SQL Server license. The standard license price is $209 per user that needs to access the server. You can also pay not by a user but by processing core or purchase the Enterprise edition for $13,748.
Finally, you’ll need licensed operating systems and other software for workstations. You may stick to the latest Microsoft 365 (cloud-based), which currently starts from $32.00 per user.
Apart from it, building affiliate marketing software may require a lot of third-party apps and integrations, e.g., CRMs, payment processing software, fraud-prevention solutions, etc. The price is custom, depending on the exact tools you need and their pricing policies.
Cloud platforms and web applications help to avoid most of these expenses, as the initial fee, on average, includes all possible licenses, as the example below shows. Saving multiple hours on figuring out the best configuration, purchasing, and implementing it is another invaluable benefit SaaS provides.
Alongside paying for hardware and software, businesses building in-house software need to consider the workforce expenditures. Start with payments for the initial server setup. The cost is $100-150 per hour, and in the best-case scenario, the team of experts would spend ten hours fine-tuning a system.
The separate line of budget is expenditures on developing an affiliate management software, which requires a lot of work and human resources. To maintain the software building, you’ll need a whole team of high-paid professionals. The total cost may change dramatically depending on the number of employees, location, payment rates a particular applicant charges, etc.
Let’s see how much a business in the UK may spend on software development personnel monthly and annually, according to Payscale:
|Role||Salary, monthly||Salary, annually|
|Software developer and QA||$3,281||$39,376|
Also, keep in mind that hiring and onboarding processes cost a lot of money. The average cost for hiring a new employee is $4,425 in the US and $3,760 (£3,000) in the UK. Calculating a true cost of onboarding is tricky due to hidden expenses. However, only the paperwork for one newcomer may be evaluated at $250, if your recruiter’s wage is $25 per hour.
Cloud services eliminate the need for hiring all these professionals. Your affiliate management team together with the SaaS provider’s customer success team may perform the initial setup and onboarding.
The initial launch of on-premise software is a costly undertaking. However, the lion’s share of all expenditures is maintenance-related spending, including personnel, updates, upgrades, and tackling emergencies and downtime.
IT infrastructure may serve you for several years, but as time goes on, various parts of it may require updates and replacement. The expenses can surge if you need to scale your computing power to process more data. And it’s nearly impossible to predict the total sum you may spend on it.
Server, SQL, and workstation licenses need regular renewal. If the personnel, or the number of users, will grow, you may need to pay for additional licenses. So, you have to pay for licensing at least as much as you’ve spent initially. However, the largest item in the on-premise software expenditures is personnel.
of the IT budget is allocated for IT staff compensation
If we add expenses on administrative personnel, service & support, training, and troubleshooting spending, this line may gobble up to 85% of your budget.
Adhering to SaaS applications allows you to cut most of these costs. You don’t need to invest in updating hardware, renewing licenses, or troubleshooting issues. In Affise, all software-related processes, including upgrades and outage response, are handled by the SaaS management team in real-time for no additional price.
Your in-house team may also be reduced from dozens of developers, managers, and administrative personnel to only several affiliate network managers. As a result, only your personnel spendings are 40-75% lower, and most of your regular expenses boil down to paying SaaS subscription fees.
The in-house software development and maintenance expenses are twofold higher than on SaaS. However, the biggest flow of on-premise software spending is unpredictability.
McKinsey conducted a survey to explore the performance of various in-house IT projects. The company had found out that 66% of businesses encounter significant cost overruns when building software.
17% of IT projects go so wrong that it threatens the company's existence.
The software development and maintenance implies a lot of hidden costs and losses, including:
Building such a complex product as affiliate marketing software from scratch takes a lot of time. The longer your team works on the solution, the more money you spend on salaries and the more losses you suffer. While your software is in the development process, you have to postpone the launch and lose income or pay for temporary third-party solutions and cloud platforms.
To operate in the affiliate marketing industry, you must comply with data protection standards and regulations. It means regular and lengthy audits as well as investments in achieving compliance. For instance, to get SOC 2 Type II certificate, Affise has undergone an 11 months-long audit and had to tweak many processes. If the compliance isn’t met, you risk paying enormous fines – up to $20 million or 4% of an annual turnover.
Emergencies and downtime are possible in any case. However, sticking to a reliable SaaS allows you to reduce the chances drastically. For instance, Affise guarantees 99,99% of uptime. Is it the case with your in-house software? Moreover, emergencies on SaaS are tackled faster and cheaper than with on-premise software; the technical support is always here to help you, and you don’t have to pay for overtime.
Building on-premise software is a complex and labor-intensive process, which will shift your attention away from the main business goals and processes with 100% probability. This expense is hard to measure and downplay – you put on the line your revenue, business growth, brand reputation, etc.
The majority of SaaS providers constantly monitor industry trends and customers’ needs and invest a lot to stay ahead of the competition. A small affiliate network or agency doesn’t have the same resources, which means slower updates and software obsolescence. Outdated software may not tackle the ever-emerging challenges effectively, which cost you loyal clients.
With SaaS applications, you always know how much the implementation and ongoing costs would take. In most cases, they boil down to regular subscription fees, though various affiliate platforms offer different pricing structures. Affise sticks to three pricing plans, or platform fee plans, with various sets of features and specific numbers of conversions and impressions:
Each of these plans may be adjusted to your business needs. Scale is an optimal package for a medium affiliate network, which costs you only $9,600 annually.
It’s 1,5X less than you spend ONLY on licenses for three servers!
For that price, you get the exact amount of conversions and impressions you need, as well as additional tracking domains, automation, and 24/7 chat support. These features will save you loads of time and money on affiliate marketing management.
If your business requires more conversions or impressions, you need to additionally pay a usage fee for them. For instance, 100,000 conversions and 100 mln impressions on the Scale plan will cost you $1,600 a month, which, together with a platform fee, is still way cheaper than developing an in-house solution.
Cost of in-house affiliate marketing software development
Annual cost of Affise on a Scale plan with extra conversions and impressions
And you’re paying upfront so that the account wouldn’t surprise you at the end of the month.
Apart from predictability, SaaS has another advantage – lower costs and time spent on implementation. If developing an on-premise software takes months or years, starting with SaaS and setting up a platform requires just a couple of days. Migrating multiple partners and clients to the SaaS solution can take a bit more time. All in all, you may start seeing the first traffic and revenue growth results in a couple of months, as one of the Affise clients did.
Affise implementation and setup require no additional spending – only regular platform and usage fees according to your chosen pricing.
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